Final exam 1 1. Total compensation includes: a. Wages and salaries and all fringe benefits b. Wages and salaries and public (legally mandated) fringe benefits only c. Wages and salaries and private (nonmandatory) fringe benefits only d. Wages and salaries and all fringe benefits net of all personal taxes 2. Fringe benefits currently account for approximately what percentage of total compensation? a. 5% 10% c. 25% 30% b. 15% 20% d. 35% 40% 3. As a percentage of benefits, the largest share goes to: a. retirement and savings c. paid leave b. insurance d. legally required benefits 4. The proportion of total compensation paid out as fringe benefits tends to be larger in: a. high-paid industries compared to low-paid industries b. service industries compared to manufacturing industries c. white-collar occupations compared to blue-collar occupations d. retail trade compared to transportation and public utilities 5. Which one of the following is not a valid explanation for why workers may prefer an extra dollars worth of fringe benefits to an extra dollars worth of cash? a. workers may prefer to bind themselves against their own tendencies toward immediate gratification b. certain fringe benefits effectively trade current taxes for future taxes c. people generally prefer in-kind benefits to cash d. certain fringe benefits are untaxed 6. The trend of fringe benefits as a percentage of total compensation can be partially explained by the fact that: a. tax reform has rendered many types of fringe benefits fully taxable b. in-kind benefits restrict workers consumption choices c. the firm may be able to purchase fringe benefits more cheaply than workers d. many types of fringe benefits are income inelastic Final exam 2 7. Which of the following is not a cause of fringe benefit growth? a. Tax advantages to the employer b. Efficiency considerations c. Economies of scale d. Fringe benefits are income inelastic 8. The principal-agent problem arises primarily because: a. principals and agents work in a team, leading to free-rider problems b. principals and agents have common interests c. principals pursue some of their own objectives that may conflict with the objectives of the agents d. agents pursue some of their own objectives that may conflict with the objectives of the principals 9. Which one of the following best represents the principal-agent problem in the employer-employee relationship? a. An employee works during a paid lunch hour in order to leave work one hour early b. An employer fails to provide safety goggles to a worker as required by occupational safety and health legislation c. a worker leaves work early without permission d. A worker opts for early retirement in response to the firms incentive plan 10. Compensation paid in proportion to the value of sales best describes: a. piece rates c. time rates b. commissions d. bonuses 11. Which of the following best exemplifies a piece-rate compensation scheme? a. Joses pay is proportional to the number of wiring harnesses he assembles each day b. Carlas pay is proportional to the value of her sales at the dress shop each month c. Stans pay is proportional to the number of his textbooks sold each year d. Louises pay is proportional to the number of hours she works each month 12. Royalties would most likely be received by a(n): a. art dealer c. used car dealer b. factory worker d. author Final exam 3 13. For employers, the chief advantage of royalties and commissions is that these pay policies: a. promote teamwork and cooperation b. increase turnover c. reduce shirking where work effort is costly to observe d. reduce income variability 14. Raises and promotions are used by employers as a device to: a. reduce shirking by salaried workers b. transform labor from a quasi-fixed to a variable resource c. reduce turnover by hourly workers d. reduce free-riding by teams of workers 15. The effectiveness of profit-sharing plans may be diminished because: a. potent…
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